Recent Court of Appeal decision reaffirms that claims in knowing receipt will not succeed without a continued proprietary interest in the property

February 2, 2022

Amie Boothman


The recent Court of Appeal judgment in Byers v Saudi National Bank [2022] EWCA Civ 43, handed down on 27 January 2022, considered two issues; whether a claim for knowing receipt is dependent on the claimant having a continuing proprietary interest in the property in question when in the hands of the defendant and whether such an interest existed between the parties in this matter while having regard to the relevant Saudi Arabian law.

Following a substantive analysis of the relevant case law, the Court dismissed the appeal and held that a continuing proprietary interest is a necessary element in a knowing receipt claim.


The Claimant was an investment company (Saad Investments Company Ltd) registered in the Cayman Islands and its joint official liquidators (‘the company’) who was the beneficiary of a Cayman Island trust which owned shares in five Saudi Arabian companies. The trustee had transferred the shares, worth approximately $318million (US), to a Saudi Arabian Bank (Samba Financial Group) (‘Samba’) to discharge part of a debt he owed to the bank (‘the transfer’). The transfer of the shares was governed by Saudi Arabian law.

While this case has a relatively scattered procedural history initially, the company ultimately issued a claim in May 2017 for knowing receipt against Samba on the basis that the transfer was in breach of trust. At trial, Mr Justice Fancourt dismissed the claim on the basis that “absent a continuing proprietary interest in the [shares] at the time of Samba’s registration, the claim in knowing receipt as pleaded will fail” on the basis that the company “had no continuing proprietary interest in the [shares] after the [transfer] capable of supporting a claim against Samba in knowing receipt”.

Following Mr Justice Fancourt’s judgment, Samba’s assets and liabilities were transferred to the respondent to the appeal, another Saudi Arabian Bank; Saudi National Bank (‘SNB’).

The company appealed on three bases; (i) the company did not need a continuing proprietary interest in the shares to succeed in a knowing receipt claim (ii) nonetheless, the company’s interest in the shares was not distinguished as a matter of Saudi Arabian law and (iii) the Judge erred in finding it appropriate to apply a block discount.


Knowing Receipt

Within its analysis of the case law, the Court relied upon the passage of Hoffman LJ in El Ajou v Dollar Land Holdings PLC [1994] 2 All ER 685 which sets out that, in a knowing receipt claim, the claimant must show:

“first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty”.

Accordingly, the Court concluded that success in a knowing receipt claim depends, in respect of Hoffman LJ’s second point, on a defendant having received trust assets, not just benefited from them. Therefore, the gist of the action is a continuing proprietary interest following a transfer.

The Court also considered academic commentary (including Goff & Jones ‘The Law of Unjust Enrichment’, 9th Ed. 2016 and ‘Remedies for Knowing Receipt’ by Charles Mitchell and Stephen Watterson, 2010) and conclusions of Lord Sumption in Williams v Central Bank of Nigeria [2014] UKSC 10:

“The essence of a liability to account on the footing of knowing receipt is that the defendant has accepted trust assets knowing that they were transferred to him in breach of trust and that he had no right to receive them. His possession is therefore at all times wrongful and adverse to the rights of both the true trustees and the beneficiaries. […] His sole obligation of any practical significance is to restore the assets immediately”

Ultimately, the Court held that Mr Justice Fancourt was right to have concluded that a knowing recipient “must have held trust property, not property to which from the moment of receipt he had good title” and that “a claim in knowing receipt, where dishonest assistance is not alleged, will fail if, at the moment of receipt, the beneficiary’s equitable proprietary interest is destroyed or overridden so that the recipient holds the property as beneficial owner of it”.

Saudi Arabian Law

Mr Justice Fancourt, at trial, concluded that the beneficial interest of the company under English/Cayman law would not have been recognised by the Saudi Arabian Courts. Mr Justice Fancourt’s judgment in respect of the effect of Saudi Arabian law relied upon the cross-examination at trial of two experts for two court days on two reports produced by those experts that ran to 300 pages each with approximately 2,500 exhibits. The task of determining how Saudi Arabian Courts would interpret the law was a question of fact based on the extensive expert evidence dealing with principles and concepts far removed from the common law system and instead, looked at through the lens of an Islamic system and the culture in the capital markets in Saudi Arabia.

On appeal, the Court relied upon the principles set out in the judgment of Lewison LJ in FAGE UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 and concluded that the company had not satisfied the criteria for the Court to interfere with Mr Justice Fancourt’s findings of fact on foreign law.

Block Discount

The third issue on appeal was whether the Judge erred in his conclusion that a block discount should be applied when determining the objective value of the shares for the purposes of an account when valuing the benefit obtained and retained by SNB.

In light of the Court of Appeal’s conclusions in relation to the issue of knowing receipt, it was unnecessary to determine the block discount issue. For completeness however, the Court outlined “we would not […] wish to be taken to have endorsed the Judge’s conclusions. It seems to us that there is a persuasive argument for saying that, where a trustee has elected to receive the value of an asset rather than its return in specie, the sum which is necessary to restore […] the trust fund will often at least be best determined by reference to the cost of the asset had it been purchased by the trustee rather than what the asset would have fetched on a sale”. On that basis, the trust fund would be put back into the position it would have been in if the misappropriated asset was still held for the benefit of the beneficiaries.


This Court of Appeal judgment provides a useful analysis of the intricacies of a claim in knowing receipt and the strict requirement to show a continuing proprietary interest.